“This will be a huge advantage for Australia, not only for
our big businesses, but also for our small and medium
enterprises that want to do business here,” Gillard said. A
formal announcement of the plan, which will see Australia’s
dollar become the third major currency allowed to have direct
trading links with the yuan, will be made tomorrow, she said.

China remained Australia’s top trading partner in February,
with transactions at A$9.7 billion ($10.1 billion), according to
the bureau of statistics. Asia’s largest economy took about a
third of the nation’s exports that month and is the major
customer for iron ore and coal.

The PBOC announces a daily reference rate for the yuan
against the Australian dollar at around 9:15 a.m. in Shanghai on
each trading day, based on market-maker prices. Direct trading
means the fixing will be computed without involving a cross rate
with the dollar.

Lower Costs

“The effect is the convenience of being able to do this,”
he said. “For example, in a trade document, rather than going
through the U.S. dollar and having the movement of the currency
over time, you can immediately lock in the exchange rate.”

The yuan gained 0.08 percent to 6.4379 per Australian
dollar as of 11:03 a.m. in Hong Kong, according to data compiled
by Bloomberg. It touched 6.4228 earlier, the strongest level
since March 14. The central bank raised the yuan’s reference
rate against the Australian dollar by 0.78 percent today to
6.4984, the biggest gain since Feb. 21.

The Australian dollar follows the greenback and the yen in
being able to be directly traded with the yuan.

“Direct trading is likely to lead to narrower bid-ask
spreads and lower costs for customers,” said Dariusz Kowalczyk,
a Hong Kong-based strategist at Credit Agricole CIB. “We do not
expect a lot of foreign-exchange trading volumes as most flows
are still settled in the U.S. dollar, but the announcement
represents an important move in collaboration between the two
countries and in the development of offshore markets.”

Rising Usage

Chinese Premier Li Keqiang took office last month and
retained Zhou Xiaochuan as central bank governor, a vote of
confidence in policies that include promoting the usage of yuan
in global trade and finance. Zhou is seeking to reduce reliance
on the dollar, as China has accumulated $3.3 trillion of
foreign-exchange reserves, the world’s largest stockpile.

The yuan climbed to a 19-year high 6.1986 against the
greenback on April 2, prices from the China Foreign Exchange
Trade System show. It was the 14th most-used currency in global
payments in February, according to the Society for Worldwide
Interbank Financial Telecommunication, surpassing the Russian
ruble the previous month. It had a 0.6 percent share, figures
from the financial messaging platform show.

‘Important Step’

Taiwanese banks started accepting yuan deposits in February,
while authorities in Beijing appointed Industrial & Commercial
Bank of China (601398) Ltd. as the yuan clearing bank in Singapore. Bank
of England said it has the inside edge to be the first Group of
Seven nation to sign a currency-swap agreement with China after
a meeting in February.

The yuan-Aussie direct trading is “an important step in
the process of internationalizing the renminbi,” Neville Power,
chief executive officer of Perth-based Fortescue Metals Group
Ltd. (FMG), said in an interview on Bloomberg TV today. “Going
forward I see more opportunities to do direct trading in the
renminbi,” he said.